$K (Kellogg Company)

$K 2Q15 PR: Net sales for the quarter were $3,498MM compared to $3,685MM in the same period last year. Net sales decreased by 5.1%, as the result of currency translation. Net income attributable to Kellogg Company for the quarter were $223MM compared to $295MM in the same period last year.

$K still believes currency-neutral comparable operating profit will grow 7-9% year on year for FY17, as productivity savings offset the impact of lower net sales. Kellogg Co still expects to generate growth of 8-10% off a 2016 base that excludes after-tax $0.02 from deconsolidated Venezuela results to $4.03-4.09.

While posting 2Q17 results, $K continues to forecast a decline in currency-neutral comparable net sales of about 3% in 2017, with no change to its estimates for the DSD exit's impact or for the rest of the business.

$AVP appointed Jonathan Myers as EVP and COO, effective Sept. 1, 2017. Most recently, Jonathan served as $K's VP, Western European Markets, and Managing Director, UK and Ireland. Last week, $AVP appointed Miguel Fernandez as Global President responsible for Commercial Business Operations.

Cereal maker $K has elected Carter Cast to its board
of directors, effective June 15, 2017. Cast has served as CEO of Walmart.com
and online retail company Hayneedle. Earlier, he served as VP of product
marketing at Electronic Arts. Currently, Cast is a
faculty at Northwestern University's Kellogg School of Management.

$K said it still has some cash costs associated with few restructurings initiatives that are in place. The company said it is still focused on working capital and other initiatives, and believes it can achieve its target of $1.1-1.2Bil cash flow for 2017.

On operating profit, $K continues to project 350 basis point margin growth through 2018. The company had a lift in the operating profit margin in 1Q17, and sees margin expansion of more than basis points for 2017.

$K now forecasts a decline in currency-neutral comparable net sales of about 3% in FY17, with comparable-basis EPS expected at $3.91-3.97. “While it is important that we are on track to deliver on our 2017 currency-neutral comparable profit and earnings outlook, we remain committed to returning to top-line growth,” said CEO John Bryant.

Reported sales of cereal maker $K fell 4.1% to $3.25Bil in 1Q17, as it posted a 49.7% jump in net income of $262MM from $175MM a year ago. Earnings soared 51% to $0.74 per diluted share from $0.49 a share, due to year-ago interest costs of a bond tender and a lower tax rate.

The BoD of $K declared regular quarterly dividend of $0.52 per share on its common stock. The dividend will be payable on June 15, 2017 to shareowners of record on June 1, 2017. The ex-dividend date is May 30, 2017. In addition, the company's BoD announced plans to lift quarterly dividend by 4% to $0.54 per share beginning with 3Q17.

$K expects
GM to expand in 2017 and this includes some headwind from the price reductions
it will take in the US Snacks business. The company is seeing some deflation in
materials overall. $K is seeing some transactional currency exposure and general
inflation in wages and logistics costs. Taking together these factors, $K expects
GM expansion.

$K aims
to bring the operating margins of the Snacks division up to in line with the
North American operating margins for the whole company. This is expected to
happen in 2018 and 2019. The company expects an operating margin expansion of
350BP in 2018 as part of its guidance. $K hopes to expand margins going into 2019
and beyond.

$K's North
America Other segment, which comprises of US Frozen Foods, Canada and Kashi, underwent
some major changes such as SKU lineups, food and packaging overhauls and new pricing
strategies. During 4Q16, there was some
modest sequential improvement in revenues with substantially better profit and profit
margin performance.

$K decided to exit its Direct Store Delivery selling and distribution
system, shifting roughly 60% of its US Snacks segment to the warehouse
distribution system through which it currently distributes the rest of US Snacks
and all of its other North America businesses. The company expects a reduction
in net sales in US Snacks during 2017.

$K expects 2017 currency-neutral comparable net sales to decline by about 2%, while still predicting comparable operating profit growth of 7-9%. $K expects 2017 to generate growth on EPS, on a currency-neutral comparable basis, of 8-10% off a 2016 base to $4.03-4.09. $K sees comparable EPS of $3.91-3.97 and cash flow of about $1.6-1.7Bil.